This Fast-Growing “Smart Bank” ETF Deserves A Closer Look
First Trust Nasdaq Bank (Nasdaq: FTXO) is far from a well-known ETF, having only debuted late last September but it has attracted over $870 million year-to-date via creation flows. This is a “Smart Beta” product that clearly has garnered some interest and attention lately in gathering these notable assets year-to-date.
When we look at fund literature, FTXO is described as tracking the “Nasdaq U.S. Smart Banks Index,” which is described as follows:
“A modified factor weighted index created and administered by Nasdaq, Inc. designed to provide exposure to U.S. companies within the banking industry.
Nasdaq selects the 30 most liquid eligible bank securities from the NASDAQ U.S. Benchmark Index and then ranks those securities based on three factors:
- Volatility – trailing 12-month price fluctuation,
- Value – cash flow to price,
- Growth – the 3-, 6-, 9-, and 12-month average price appreciation.
The securities are weighted based on their score on the three factors.
The index weighting methodology includes caps to prevent high concentrations among single stocks and is reconstituted annually and rebalanced quarterly.”
Our key takeaway from these statements is that this is far from a passively managed portfolio, as the index name “Smart Banks” would hint at, and the annual reconstitution that takes place gives the fund an opportunity to be constantly dynamic in including or excluding bank names that may or may not fit the investment criteria. This is another “Smart Beta” product that clearly has garnered some interest and attention lately in gathering these notable assets year-to-date.
Categorized as “Large Cap” within the greater Financial Equity sector, FTXO competes with other “Bank” ETFs such as SPDR S&P Regional Banking (NYSE: KRE), and SPDR S&P Bank (NYSE: KBE). Thanks to strong asset growth since inception this fund is actually the third largest “Bank” ETF in terms of asset size in the U.S. listed landscape presently.
When we look at current top holdings in FTXO we see the following:
From a market cap standpoint Large Caps are well represented presently (70% of the portfolio), followed by lesser weightings to Mid-Caps (24%), and Small-Caps (6%).
...Year-to-date, FTXO has gained 0.77%, versus a 5.72% rise in the benchmark S&P 500 index during the same period.
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